Welfare Reform A Situation Analysis David Magor OBE IRRV Chief - - PowerPoint PPT Presentation

Welfare Reform A Situation Analysis

David Magor OBE IRRV

Chief Executive Institute of Revenues Rating and Valuation

The Biggest Reform of Social Security in 60 Years

The Enabling Power

The Second Act is in Place

• DEFICIT REDUCTION
• Government’s top

priority.

• Taxpayers were paying

almost £120 million a day (£43 billion a year) in debt interest - more than council tax, stamp duty and inheritance tax combined last year

WELFARE REFORM

• Reforming the welfare

system - to make it fairer, more affordable and better able to tackle poverty, worklessness and welfare dependency

LOCALISATION

• Coalition principles of

increasing freedom and sharing responsibility by localising power and funding.

• De-ringfencing of funding,

abolition of top-down targets and inspection regime

• The most fundamental reform of the social security system for 60 years
• A continuing deficit target
• A further £10bn
• Under 25’s
• Financial support for the family
• So far it includes the following:
• Housing Benefit changes
• Universal Credit
• Personal Independence Payment, ESA changes and specialist disability support
• Benefit cap
• Social Fund changes
• State Pension age changes
• Single Fraud Investigation Service
• Council Tax Reduction Schemes

Welfare Reform - The Wider Picture

Personal Independence Payment

Universal Credit

The Changes

Child Benefit, Carer’s Allowance (will remain) Income related JSA Income related ESA Income Support (including SMI) Working Tax Credits Child Tax Credits Housing Benefit Disability Living allowance

Current system New system

Contributory JSA and ESA (DWP still considering how these will work) Council Tax Reduction and Rate Support ( schemes being considered)

… will include support for housing and children

Pension credit

Universal Credit Programme

• Migration is being diluted
• Recapping the scheme

– A reduction in complexity via a new single system for means-tested support, for; – Working age people, in or out of work – Support for housing, children and childcare costs – Additions for disabled people and carers – Requires a change in cultural attitudes to work and claiming benefit – To use new online channels - ‘digital by default’ – Monthly household payments – Access to a bank account and personal budgeting

Migration - Three different types

• f Universal Credit claim
• New Universal Credit Claim – where legacy benefits are

closed to new entrants

• Natural Migration – where a change of circumstance no

longer results in a new legacy award, but a migration of the entire household entitlement to Universal Credit

• Managed Migration – where DWP initiates the transfer
• f an entire household from legacy benefits to one

Universal Credit entitlement –

75% of claims in the first 4 years will be as a result of migration

Natural Migration

• Natural Migration is triggered by one of a number
• f changes of circumstances, based on

employment status or family criteria, e.g.

– Move from out of work, to in work over x hours (JSA or IS to WTC) – Household becomes responsible for a child for the first time (New claim to CTC) – Ceased full time education (JSA to IS)

• The Natural Migration claimant journey starts with

the legacy benefit being notified of an eligible change

• Migration uses the new claim process

A three phased migration strategy

April 2014 ~600k

Phase 1 - phased launch of Universal Credit. All new claims to the current benefits and credits will be phased out by the end of April 2014.

~5m ~End 2015

Phase 2 - managed migration begins; national approach targeting those who will benefit most from UC

Oct 2017 ~8m

Phase 3 - prioritising on safe closure of HB teams in the final (geographic) stages of migration

as of September 2012

Managed Migration Design

Extracting in-scope claimants from legacy and then ultimately closing all of these cases, all in scope claims will be closed.

Management and Control

Select Cases

Legacy Systems

Trigger Claimant Communications Claimant Makes UC Claim (using UC Core processes)

Legacy Claimant Legacy Claim Close Requested

UC Claim Not made within Timescales

Small Amount of Legacy Information Provided to UC Letter, E-Mail, Phone, Face to Face Letter Internet, Phone

The Management & Control capability enables flexible volume management, bespoke MI, and protection of vulnerable cases. Providing information to UC Core that the claimant might not know or willingly

• provide. Validation and ‘fraud and error checks’ performed, and TP calculated

Use of multiple channels to deliver agreed Customer Journeys An in-bound telephone service supporting claimant’s Managed Migration journey, limiting the impact on legacy areas

Circa 3 months

Initial claimant communications, claimant preparation and protection of vulnerable cases improves UC success rate

Real Time Information

RTI, The Opening Salvo

The Beginning of RTI

Tom Harvey – works full time

Employer runs monthly payroll RTI to HMRC Payment instruction to bank HMRC compare to RTI Bank extract hash, send to HMRC Tom Harvey, 26, full time

Update taxpayer record

HMRC match record

Tom Harvey earnings reduced and claims UC

Employer runs monthly payroll RTI to HMRC Payment instruction to bank HMRC compare to RTI Bank extract hash, send to HMRC Tom Harvey, 26, full time

Update taxpayer record

HMRC match record

If UC claim, send to DWP

Department for Work and Pensions

Tom Harvey, second job

Employer 1 runs payroll RTI to HMRC, shows amt paid & hours worked

Payment instruction to bank HMRC compare to RTI Bank extract hash, send to HMRC

Employer 2 completes new starter; adds Tom to payroll; runs payroll

Department for Work and Pensions

As UC claimed, data to DWP RTI to HMRC, new starter; amt paid & hrs worked

Pays Tom by cheque HMRC match record

Update taxpayer record

DWP Direct Payment Demonstration Projects

Emerging Learning and Findings

Early days a DWP View

It’s early days on the projects – first payments to tenants were made in July 2012 So, these are very much emerging learning and findings And, we have committed to ensuring that we will learn throughout the projects

• We had a two day workshop in early September with the project areas

which enabled the projects to share their early findings on what went well and not so well so far

• We will communicate our learning within DWP and with key stakeholders

There is an understanding that most of you will be interested in the amount of arrears in the projects so far. We are putting out a press release for the areas in October to provide an

• verview including the arrears picture

In the meantime, we want to share with you some of the other things that we’ve been learning about. Many of them will not be a surprise.

Finding: Support Assessment Matrix

Who applicable to: Pathfinder/other live running; Universal Credit policy

development and supporting regulations; Social landlords, Local Authorities and Support Agencies

What is being done as a result: One of the outcomes from the

September Design Review was the change to the support and exception process used by DPDP. This process will be monitored over the project

• lifecycle. The UC design area responsible for this are also working closely

with DWP and the 6 project areas.

What: The Support Assessment Matrix – used

to determine whether a tenant can go straight

• nto DP with no support, straight on with some

support, or needs support for a while before DP – needs to be supplemented with local knowledge and insight.

Finding: Communicating with Tenants

What: Tenants did not always respond to letters, though they responded

better to letters from their landlord than from Local Authorities and to letters in coloured envelopes (by 42% in Shropshire). Some of the areas have had good results with sending text messages – though, this requires having tenants mobile phone details. Overall findings show that there is a need to adapt the contact method depending on the demographic /geographic characteristics of the individual area.

Who applicable to: Universal Credit policy development and supporting

regulations; Social Landlords and Local Authorities What is being done to communicate this finding: It was captured in the

• utputs from the Design Review and will be disseminated wider within DWP

to inform other testing (for example the LA led pilots) and ultimately the roll

• ut of Universal Credit

Finding: Tenants’ issues are

• ften complex

What: Tenants can often have complex and multiple issues – e.g. they are unemployed, have literacy problems and drug problems, The assessment process for direct payments has uncovered the need for other services (especially social services) to become involved. Who applicable to: Universal Credit policy development and supporting regulations; Social Landlords; Social Services; Local Authorities and other Support Agencies What is being done to communicate this finding: This was captured in the outputs from the Design Review and is being disseminated to the Support and Exceptions team in DWP to inform Universal Credit and also to the Personal Budgeting team in DWP.

Finding: the need to develop staff

What: The project areas have found that there will be a requirement to understand in greater detail budgeting and finance advice for tenants. Who this is applicable to: Local Authorities, Social Landlords, DWP Communications What is being done to communicate this finding: This was captured in the outputs from the Design Review. Money Advice Service are putting together a toolkit and the Demonstration Projects are feeding into this. The DWP UC Personal Budgeting team are also feeding into this.

Finding: the need to understand the welfare reforms

What: Staff involved in dealing with tenants will need to understand the welfare reforms and their wider context. Who this is applicable to: Local Authorities, Social Landlords, DWP Communications What is being done to communicate this finding: This was captured in the outputs from the Design Review and DWP Communications will be providing information, the next Communication is scheduled for October 2012.

Finding: need to separate rent and benefits in communications

What: Need to separate rent from benefit in all communications to the tenant. In Universal Credit tenant communications will need to be clear that their benefit payment will include their rent and it is the tenants responsibility to pay their rent. Communications that came jointly from Local Authorities and Landlords confused tenants. Who is this applicable to: Universal Credit; Local Authorities and Social Landlords. What is being done to communicate this finding: This was captured in the outputs from the Design Review and will be disseminated wider within DWP Communications.

Finding: setting up bank accounts for UC payment

What: validation by the Social Landlord of the type of bank details provided by the tenant is very important as tenants can provide Post Office account or prepay card details which do not accept direct debits. Who is this applicable to: Universal Credit; Social Landlords. What is being done to communicate this finding: This was captured in the outputs from the Design Review and will be disseminated wider by DWP Communications to ensure that tenants understand that certain types of account cannot be used for direct debits. Money Advice Service are putting together a toolkit which may also cover this issue and the Demonstration Projects are feeding into this.

Finding: setting up and maintaining Direct Debit details

• What: Tenant communications understanding Direct

Debits and managing these throughout their UC life, including if there is a need to stop the Direct Debit

• Who is this applicable to: Universal Credit; Social

Landlords.

• What is being done to communicate this finding:

This was captured in the outputs from the Design Review and will be disseminated wider by DWP

• Communications. Money Advice Service are putting

together a toolkit which may cover this issue and the Demonstration Projects are feeding into this. The UC Personal Budgeting team are also looking at how tenants can be helped to be made financially capable.

Finding: advantage in landlords knowing more about their tenants

What: all of the project areas felt that the process of implementing direct payments would have been smoother if they had more information about their tenants, both in terms of operating the support assessment matrix and in actually giving the support Who is this applicable to: Social Landlords. What is being done to communicate this finding: This was captured in the outputs from the Design Review, and Social Landlords are aware that they need to understand more about their tenant.

Universal Credit Calculation

Key stages in the UC calculation process together with CTR and Data Availability

Context

• DWP currently transmits data to LAs for Housing

and Council Tax Benefit

• LAs require Universal Credit data to be transferred

for CTR purposes

• The UC calculation process is markedly different

from existing legacy benefits

• Devolved Administrations and LAs to clarify

requirements for CTR

• Show the stages of the Universal Credit calculation
• Highlight which figures may be available for

transmission to Local Authorities for the purposes of CTR assessment

• Explain which elements are still subject to design

and/or Policy activity

SUMMARY – THE KEY STAGES IN THE UC ASSESSMENT

PROCESS

STAGE 3 – CALCULATE UC ENTITLEMENT

(APPLY ANY SANCTIONS, ADD ANY HARDSHIP PAYMENTS)

STAGE 2 – CALCULATE THE ADJUSTED UC AWARD

(DEDUCT EARNINGS, CAPITAL, INCOME, BENEFIT CAP)

then STAGE 0 – IDENTIFY WHO IS IN THE BENEFIT UNIT

(ADULTS, DEPENDENT CHILDREN AND NON-DEPENDANTS)

STAGE 1 – CALCULATE THE UC MAXIMUM AMOUNT

(TOTAL ALLOWED FOR LIVING AND HOUSING COSTS)

then then STAGE 4 – CALCULATE THE UC PAYMENT

(ADD ANY ADVANCES, APPLY ANY DEDUCTIONS)

then

STAGE 0 – IDENTIFY THE BENEFIT UNIT

One or two ‘eligible (and connected ) adult claimants, and relevant child dependents = The UC Benefit Unit Identify (for Housing

Element purposes only)

any non-dependants

STAGE 1 – CALCULATE THE BENEFIT UNIT’S ‘MAXIMUM

AMOUNT’ BY ADDING UP RELEVANT AMOUNTS COVERING……

Childcare Element Carer Element Housing Element

LCW

Limited capability for Work Related Activity,

• r Work Element

Carer

Child Element/Disabled Child Additions Standard Allowance

Adults Children Housing Childcare

Tick indicates available for CTRS

STAGE 2 (a) – CALCULATE THE UC ‘ADJUSTED AWARD’

Any earnings (subject to any disregards and taper) Other applicable income minus

UC MAXIMUM AMOUNT

Tariff income from applicable capital minus minus And then...... Tick indicates available for CTRS

STAGE 2 (b) – ‘CALCULATE THE UC ‘ADJUSTED AWARD’ BY

APPLYING FURTHER CRITERIA

Any increases necessary (where Cap does/will not apply) to take account of Transitional Protection minus ADJUSTED AWARD stage 2(a) Any reductions necessary to take account

• f the Benefit Cap

plus

UC ADJUSTED AWARD equals

Tick indicates available for CTRS

STAGE 3 –CALCULATE THE ‘UC ENTITLEMENT’

minus UC ADJUSTED AWARD Any conditionality sanctions (plus any hardship payment amounts) equals

UC ENTITLEMENT

Tick indicates available for CTRS

STAGE 4 – ESTABLISH ANY DEDUCTIONS TO BE MADE TO UC

ENTITLEMENT TO WORK OUT THE ‘UC PAYMENT’

Any short-term or budgeting advance UC ENTITLEMENT plus

The UC Payment

equals and Any agreed deductions e.g. child support, third party rent payments) minus Tick indicates available for CTRS

Single Fraud Investigation Service

Progress/Current situation

• 4 SFIS pilots
• Hillingdon, Corby, Wrexham, Glasgow
• 1 LA Managed and in LA accommodation
• Partnership working, but
• Still massive uncertainty

Council Tax Reduction Schemes

Council Tax Reduction (1)

• Is your scheme developed?
• Are you out to public consultation?
• Did you meet the consultation criteria?
• What is your relationship with Major

Precepting Authorities?

• Are you talking to Local Precepting

Authorities?

Council Tax Reduction (2)

• Have you prepared you EIA?
• Have you prepared a draft tax base?
• Are you ready to manage and monitor the

collection fund?

• Have you devised your communication

strategy?

• Are you ready to finalise your scheme and

deliver it?

44

Transitional grant - overview

– Additional £100 million of funding for councils to help support them in developing well-designed council tax support schemes and maintain positive incentives to work. – The voluntary grant will be available to councils (billing and major precepting authorities) who choose to design their local schemes so that they comply with certain criteria. – This grant is intended to provide some headroom for those authorities who are looking across all of their options for funding savings to ensure that those currently in receipt of support do not face a large tax increase – – Funding allocations have already been published, so local authorities know how much they could stand to receive. – Expect that councils will make applications after 31 January 2013, and that funding will be paid in March 2013.

45

Transitional grant – criteria (1)

• Those who would be entitled to 100% support under

current council tax benefit arrangements pay between zero and no more than 8.5% of their net council tax liability;

• Applies to both means-tested and passported
• This is before the application of non-dependant deductions /

second adult rebate – these are not caught by the scheme criteria

• If they would be entitled to 100% support under current

rules, they cannot be required to pay more than 8.5% of their maximum net liability (i.e. after other discounts, such as SPD, have been applied) under the new scheme.

• This means that changes to capital rules / similar that would

make claimants currently eligible for support completely ineligible would not be compliant with the grant.

46

Transitional grant – criteria (2)

• The taper rate does not

increase above 25%;

– Local authorities would be free to stick to the 20% taper rate – or lower

47

Transitional grant – criteria (3)

• There is no sharp reduction in support for those entering work

– This is intended to ensure that there is no sudden drop in support as a person’s income increases and they move off entitlement for the maximum reduction – It is intended to ensure that the taper operates as at present – that is, that excess income is tapered in relation to the maximum eligible reduction – This means schemes which cap support at a band level would not be compliant – as the starting point for all is a greater than 8.5% minimum liability – Also means that schemes which, for example, require those out of work to make no contribution but require everyone in work to make at least some contribution before the application of the taper or non-dependant deductions would not be compliant

The Appeal Process for CTR

The Process

• Notification

– Extent of detail – Detailed statements

• Appeal to the local authority

– Decision

• Appeal to another place

– The Valuation Tribunal Service – Enabling power already in place

Appealing to the VTS

• Process
• Need for regulation?
• Practice Statements
• Procedure Statements
• Sufficient expertise?
• Customer friendly?
• Is there a capacity issue?

The Hearing

• Amendment in the Bill
• Provision for cases to be heard before a

Judge in England but not in Wales

• Evidence of scheme to be formally given?
• These are liability appeals
• Will there be a crossover with UC

appeals?

• The big question “what is the potential

volume”

Is Local Government Ready for Welfare Reform?

Local Authorities and Welfare Reform

• Local authorities, along with other public, private and

third sector organisations, have a significant role to play in managing the changes associated with Welfare Reform

• Local authorities will have a key role in supporting

customers and tenants during the transition to and beyond new local services – whether you want to or not

• Local authorities will need sufficient expertise,

knowledge and capacity to effectively manage the impact of Welfare Reform – but who is going to pay for it

• Local authorities will have to align local services with the

Government’s aims and objectives as they become clearer

Supporting the transition

• There are a number of roles, planned and imposed by

default, for local government in preparing customers for the changes

– By delivering new local services – Reconfiguring service offerings to reflect post-reform world – Some of these functions have already been started – But, budget uncertainty is hampering change – The impact of Welfare Reform and localism will need to be refined, integrated and aligned strategically to existing Local Authority services – Time is short

Preparing customers for the changes

• Keep local government informed by

– Developing a meaningful communication strategy – Providing generic information and advice regarding the changes – Tailoring the advice to ensure individual impacts are communicated – Signposting citizens/tenants to other sources of information/support – Identifying those most affected by the changes and provide individual/tailored support and advice/guidance, but

• Who does what ???

Development of New Local Services

• Carry out a service review
• Adapt how existing services are delivered
• Administer local welfare provision, whatever its

going to be

• Revise council-wide/strategic approach
• Develop integrated new local services
• Create new service delivery models
• A new relationship with DWP and HMRC

Preparing the way

• Have you thought about how your authority will support

the cultural change of Universal Credit with channel shift and personal responsibility?

• Have you considered the totality of the Welfare Reform
• n your local services? Have you completed any impact

assessments on existing services?

• What will the broader advice network look like in your

authority? Have you considered aligning Welfare Reform to other Local Authority responsibilities, specifically those around financial and social inclusion?

In Conclusion, Some Unanswered Questions

• Is the Coalition trying to develop a new culture rather than a new

system?

• Claimants are in a period of unprecedented change but are they

aware of it ?

• Local Government is attempting to deliver localism, but do they

know what it is ?

• CTR, one successful challenge and then what happens?
• The Government is building a 21st Century benefits system

designed with flexibility and with continuous improvement from the

• utset in other words in reality is that chaos and uncertainty?
• What is the real position in the preparations to deliver UC ?
• Will it achieve its aim to simplify the benefits system and ensure

that work pays, while providing support for those who need it?

• It is being designed as a service based on claimant journeys,

what does this really mean

• Are the DWP and HMRC really working with partners and

stakeholders or is the change being imposed upon them using their specialist knowledge and skills to understand and meet the challenges of the overall reform package ? AND FINALLY !

Council tax rebate reforms risk repeat of poll tax disaster, says IFS